UAE-Russia emerging crypto network threatens to circumvent sanctions

The Resurgam Telegram channel's author analyzed the feasibility of Russia utilizing this crypto-based system for foreign trade payments at this time.

Moscow is in the final stages of creating a cryptocurrency network, likely in partnership with the UAE, as part of its broader strategy to reduce reliance on the global banking system. However, experts argue that the system isn’t ready to replace conventional banking yet.

For now, the challenge isn’t legalizing cryptocurrency for trade but building a robust institutional crypto network capable of handling large volumes, says the Resurgam channel's author. Moscow’s experimental network, linked to its National Payment System and regulated by the Bank of Moscow, has been in development since 2022.

Another issue lies with trade partners like China, where cryptocurrency is banned outright. China’s strict regulations make it risky for private or state entities to engage in crypto-based settlements, Resurgam notes. This forces Moscow to rely on an intermediary country, or “crypto-offshore,” to facilitate payments.

The UAE has emerged as Moscow’s most likely partner for these transactions. During the BRICS summit in Kazan, the UAE and Iran were the only nations supporting Moscow’s bid for an “alternative financial network.” UAE recently passed a law exempting cryptocurrency transactions from VAT, signaling its willingness to cooperate.

The UAE’s new regulations and increased registrations of dual-legal Moscow companies in 2024 suggest preparations to circumvent sanctions, the author explains. A pending agreement to avoid double taxation further solidifies this partnership.

Still, the system has limitations. Cryptocurrency cannot fully replace traditional trade payments due to the scale required and risks of capital outflow. However, it could disrupt the geopolitical landscape, posing challenges to Ukraine and Moscow’s Western adversaries.

The author believes U.S. pressure on the UAE may be the only way to counter Moscow’s plans. Moscow is encroaching on U.S. influence in the Arab world, the post warns, urging Washington to take a more proactive stance.